SEC Filings

Equity in Income of Affiliates. We recorded equity in income of affiliates of $8.6 million during the first quarter of 2018 compared to $10.1 million during the first quarter of 2017. See Notes 7 and 8 to our condensed consolidated financial statements for information about our equity investments.

Income Taxes. Income tax expense of $25.1 million was recorded for the first quarter of 2018 compared to $44.4 million recorded for the first quarter of 2017. The effective tax rate was approximately 28.8% for the first quarter of 2018 compared to 35.6% for the first quarter of 2017. The effective tax rate in 2018 benefited from a lower U.S. federal tax rate. On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act made changes to the U.S. tax code, which included (1) reduced U.S. corporate tax rate from 35 percent to 21 percent, (2) generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries, and (3) a one-time transition tax on certain undistributed earnings of foreign subsidiaries.

As of March 31, 2018, the amounts recorded for the Tax Act remain provisional for the transition tax, the re-measurement of deferred taxes, and our reassessment of valuation allowances. These estimates may be impacted by further analysis due to future clarification and guidance regarding earnings and profits computations, state tax conformity to federal tax changes, and potential tax planning options under consideration.

Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates and are adjusted for the effects of significant, infrequent or unusual items (i.e. discrete items) occurring during the interim period. As a result, the interim rate may vary significantly from the normalized annual rate.

Liquidity and Capital Resources

Operating Activities

We primarily collect our revenues in cash, mainly through box office receipts and the sale of concessions. In addition, nearly all of our theatres provide the patron a choice of using a credit card, debit card or advanced-sale type certificates such as a gift card, in place of cash. Because our revenues are received in cash prior to the payment of related expenses, we have an operating “float” and historically have not required traditional working capital financing. Cash provided by operating activities was $83.7million for the three months ended March 31, 2018 compared to $150.6million for the three months ended March 31, 2017. The decrease in cash provided by operating activities was primarily due to the decrease in net income and the timing of payments to suppliers.

Investing Activities

Our investing activities have been principally related to the development, remodel and acquisition of theatres. New theatre openings and acquisitions historically have been financed with internally generated cash and by debt financing, including borrowings under our senior secured credit facility. Cash used for investing activities was $78.9 million for the three months ended March 31, 2018 compared to $87.6 million for the three months ended March 31, 2017. The decrease was primarily due to a decrease in capital expenditures related to the remodel of certain of our existing domestic theatres.

Capital expenditures for the three months ended March 31, 2018 and 2017 were as follows (in millions):

Period

New

Theatres

Existing

Theatres (1)

Total

Three Months Ended March 31, 2018

$

17.9

$

62.3

$

80.2

Three Months Ended March 31, 2017

$

16.8

$

74.4

$

91.2

(1)

The amounts for the three months ended March 31, 2018 and 2017 include $2.1 million and $0.2 million, respectively, related to the remodel of our corporate headquarters building in Plano, TX.

Capital expenditures for existing properties in the table above includes the costs of remodeling certain of our existing theatres to include Luxury Loungers and expanded concession offerings. During the three months ended March 31, 2018 and 2017, we had an average of 80 and 106 of our domestic screens, respectively, temporarily closed for such remodels.

Our U.S. theatre circuit consisted of 339 theatres with 4,566 screens at March 31, 2018. During the three months ended March 31, 2018, we built one new theatre and 12 screens and closed one theatre with seven screens. At March 31, 2018, we had signed commitments to open three new theatres and 30 screens in domestic markets during the remainder of 2018 and open nine new theatres with 94 screens subsequent to 2018. We estimate the remaining capital expenditures for the development of these 124 domestic screens will be approximately $91 million.